Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following is considered to be a characteristic of an immediate annuity?

Payments are only made if the annuitant reaches a certain age.

The annuity accumulates interest for a fixed period before any payments are made.

Payments to the annuitant begin immediately after the initial investment is made.

The annuitant must wait at least 10 years before receiving any payments.

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Verified step by step guidance

Step 1: Understand the concept of an immediate annuity. An immediate annuity is a financial product where payments to the annuitant begin shortly after the initial investment is made, typically within one payment period (e.g., a month or year). This is in contrast to deferred annuities, where payments start after a longer accumulation period.

Step 2: Analyze the options provided in the problem. Immediate annuities do not require the annuitant to wait for a fixed period (e.g., 10 years) or accumulate interest before payments begin. Payments start immediately after the investment is made.

Step 3: Eliminate incorrect options. For example, the option stating 'Payments are only made if the annuitant reaches a certain age' refers to a conditional annuity, not an immediate annuity. Similarly, the option 'The annuity accumulates interest for a fixed period before any payments are made' describes a deferred annuity, not an immediate annuity.

Step 4: Focus on the correct characteristic of an immediate annuity. The defining feature is that payments to the annuitant begin immediately after the initial investment is made, without any waiting period or accumulation phase.

Step 5: Confirm your understanding by reviewing the definition and characteristics of immediate annuities. This ensures clarity and helps differentiate them from other types of annuities, such as deferred or conditional annuities.